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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter June 25, 2020 Case Laws in this Newsletter: GST Income Tax Customs Securities / SEBI Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws Articles AGGREGATE TURNOVER – INTEREST FROM ‘PPF’ TO BE INCLUDED? MCA EXTENDED TIMELINE FOR NAME RESERVATION AND RESUBMISSION FORMS – BEYOND 30TH JUNE 2020 Border Adjustment Tax Black Money Law - Prospective or Retrospective News National Online Quiz on Insolvency and Bankruptcy Code,2016 from 1st July,2020 -31st Jul,2020 2% Interest Subvention approved on prompt repayment of Shishu Loans under Pradhan Mantri MUDRA Yojana for a period of 12 months Purchasing Power Parities and the size of Indian Economy: Results from the 2017 International Comparison Program Notifications Companies Law G.S.R. 396(E) - dated 23-6-2020 - Co. Law Companies (Appointment and Qualification of Directors) Third Amendment Rules, 2020 G.S.R. 395(E) - dated 23-6-2020 - Co. Law Companies (Meetings of Board and its Powers) Second Amendment Rules, 2020. Customs 16/2020 - dated 23-6-2020 - ADD Seeks to impose Anti-Dumping Duty on import of Flat rolled product of steel, plated or coated with alloy of Aluminium and Zinc originating in, or exported from China PR, Vietnam and Korea RP. 28/2020 - dated 23-6-2020 - Cus Seeks to prescribe the manner and modalities in respect of WTO committed in-quota tariffs on specified items GST - States S.O. 132 - dated 22-6-2020 - Bihar SGST Amendment in Notification No. S.O. 129 dated the 9th June, 2020 S.O. 131 - dated 22-6-2020 - Bihar SGST Extend due date of compliance which falls during the period from “20.03.2020 to 29.06.2020” till 30.06.2020 and extend validity of e-way bills under section 168A of the BGST Act. S.O. 130 - dated 22-6-2020 - Bihar SGST Appoints the 8th day of June, 2020, as the date from which the provisions of the Bihar Goods and Services Tax (Fifth Amendment) Rules, 2020, shall come into force. 50/GST-2 - dated 23-6-2020 - Haryana SGST Notification to give effect to the provisions of Rule 67A for furnishing a nil return in FORM GSTR-3B by SMS under the HGST Act, 2017 18745-FIN-CT1-TAX-0001/2020 - dated 24-6-2020 - Orissa SGST Odisha Goods and Services Tax (Sixth Amendment) Rules, 2020. S.R.O. No. 141/2020 - dated 22-6-2020 - Orissa SGST Seeks to amend Notification No. 18491 dated 22.06.2020 in respect of extension of validity of e-way bill generated on or before 24.03.2020 (whose validity has expired on or after 20th day of March, 2020) till the 30th June, 2020 S.R.O. No. 140/2020 - dated 22-6-2020 - Orissa SGST Notification to extend period to pass order under Section 54(7) of the Act. S.R.O. No. 139/2020 - dated 22-6-2020 - Orissa SGST Extend the validity of e-way bills till 31.05.2020 for those e-way bills which expire during the period from 20.03.2020 to 15.04.2020 and generated till 24.03.2020 S.R.O. No. 138/2020 - dated 22-6-2020 - Orissa SGST Extend due date of compliance which falls during the period from “20.03.2020 to 29.06.2020” till 30.06.2020 and extend validity of e-way bills under section 168A of the Act. Income Tax 34/2020 - dated 23-6-2020 - IT U/s 10(46) of IT Act 1961 - Central Government notifies ‘Maharashtra Electricity Regulatory Commission’ a commission established by the State Government of Maharashtra in respect of the specified income arising to that Commission 33/2020 - dated 23-6-2020 - IT Central Government notifies ‘Greater Noida Industrial Development Authority’, an authority constituted by the State Government of Uttar Pradesh, in respect of the specified income arising to that Commission Circulars / Instructions / Orders SEBI SEBI/HO/CFD/CMD1/CIR/P/2020/106 - dated 24-6-2020 Further extension of time for submission of financial results for the quarter/half year/financial year ending 31st March 2020 due to the continuing impact of the CoVID-19 pandemic SEBI/HO/MRD1/DSAP/CIR/P/2020/107 - dated 24-6-2020 Guidelines for Order-to-trade ratio (OTR) for Algorithmic Trading Highlights / Catch Notes GST Jurisdiction - validity of registration with wrong PAN no.- The cancellation was with effect from 30th November 2019 and not from 29.9.2018. For all these period, there were no returns, which necessitated the assessing officer to assume the role of best assessment u/s 62 - Thus for all intends and purposes, there cannot be any bonafide omission or mistake. Visit to Get Source Filing of GST TRAN-1 Forms electronically - Appeal by GSTN and GST Council against direction to allow filing of TRAN-1 electronically or in manual form - The fact that the petitioner/1st respondent had attempted uploading of the form, within the period is more than established by the system log. The rejection of the return so submitted was due to the wrong table having been filled up, which is not with any ulterior motive; but was only for reason of inadvertence prompted by inexperience. - Appeal dismissed. Visit to Get Source Profiteering - supply of Refrigerator Whirlpool - The Respondent is directed to reduce the price of the above product as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit of tax reduction is passed on to the recipients. Visit to Get Source Income Tax Exemption u/s 11 - The claim of assessee for accumulation ought to have been accepted by the revenue authorities. Even in the order of assessment the AO has accepted that Form-10 was filed by the assessee and the only grievance was that the purpose for accumulation was not mentioned. - No additions. Visit to Get Source Setting up of business during the year under consideration - Assessee having invested substantial amount in the purchase of another property in the year itself, thus, set up of its business as per its Memorandum of Understanding was done, since it was engaged in the business of real estate. - the assessee having not only set up its business but had also commenced its business during the previous year itself. Visit to Get Source TP Adjustment - Addition on account of AMP expenses - The expenditure being essentially incurred with the object to boost the sales of the assessee though the brand is owned by the AE does not warrant any disallowance in the hands of the assessee. Visit to Get Source Estimation of income - Rate of Gross profit (GP) - rejection of books of account - Since the average of past history of GP declared by the assessee is considered as a proper and reasonable basis for estimation of income for the year after rejection of books of account, therefore, the GP is estimated at 10.22% as against GP declared by the assessee at 10.04% for the year under consideration and differential trading addition equivalent to GP rate of 0.18% on declared turnover is upheld and the appeal of the assessee is partly allowed. Visit to Get Source Late filing fee U/s 234E - Intimation U/s 154 r.w.s. 200A - delay in filing quarterly statement - F.Y. 2016-17 - In absence of any such allegation that the A.O. has violated any of the provisions of Section 234E or Section 200A of the Act, the adjustment made by the A.O. on account of late filing fee U/s 234E of the Act cannot be deleted. Visit to Get Source Determination and carry forward of long term capital loss in respect of shares held in Mahindra Shubhlabh Services Ltd., arising upon reduction in share capital by that company - there was extinguishment of the rights of the assessee and hence, this reduction has resulted into a capital loss in the hands of the shareholder i.e. assessee company. - assessee company received no consideration on reduction of capital - Claim not allowed. Visit to Get Source Treatment of expenditure - Revenue or capital expenditure - A sum as represent expenditure incurred in respect of acquisitions which never materialised and hence, squarely allowable as revenue expenditure in as much as no capital asset came into existence of the assessee which would derive enduring benefit of the assessee. Visit to Get Source Addition on account of Sundry Creditor merely for want of PAN of those sundry creditors - since the assessment year under consideration is 2014-15 therefore furnishing of PAN number is not mandatory as per Rule 115B of the Income Tax Rules, vide entry No. 18, which came into force with effect from 1stJanuary, 2016. Visit to Get Source Addition made u/s 69C - Unexplained huge expenditure to earn Agriculture income - once the assessee has not made any investment, the addition made u/s 69C of the Act is illegal. Visit to Get Source IBC Disciplinary Action against the Insolvency Resolution Professional (IRP) - The RP has displayed utter misunderstanding of the provisions of the Code and Regulations made thereunder. He has contravened the provisions. - The DC is conscious of the fact that the profession of IP is in a stage in which IPs are striving to learn. Even though it is incumbent upon them to build and safeguard the reputation of the profession which should enjoy the trust of the society and inspire confidence of all the stakeholders, they may not be kept away from practicing the profession especially in the absence of any malafide intention and more so when the objective of the Code i.e. resolution has been achieved within the prescribed timelines. Visit to Get Source Service Tax Validity of SCN - If the allegations in the show cause notice are true, the department could have undertaken more serious investigations using all the powers available to the officers under the law including taking legal action against anyone dishonouring the summons. However, this cannot be a ground to issue a show cause notice without clarifying under what head the tax has to be paid and for which taxable services received by the appellant. Visit to Get Source VAT Classification of goods - Black Disinfectant Fluid (BDF) - There is no contradiction by the State to the contention that BDF is used as a disinfectant to sterilize houses, hospitals, veterinary hospitals etc. and that the product is also applied to the wounds of animals to kill maggots, worms etc. in the wounds. - BDF is covered under Entry 25 of Schedule C of the 2003 Act. Visit to Get Source Rate of tax - classification of goods - sales of ‘sports shoes’ and ‘sports apparel’ - The word ‘garments’ in Entry 52 of IV Schedule is of wide import and ‘sports apparel’ would fall under the said entry - When the Department authorities did not make any product verification, they could not have changed the classification of the ‘sports shoes’ from Entry 46 in Schedule IV, which they had been doing for the previous ten years, to the residuary Entry in V Schedule. Visit to Get Source Rate of Tax - Classification - Instrument Cooling Fan - It is a settled principle of law that if an item or entry clearly comes under one of the Schedules given in the fiscal law, where the rate of tax is to be determined, then it should not be relegated to the residuary clause. In this case the goods in question is categorically a part of telecommunication equipment and therefore it could have been charged only under entry no. 3 of Schedule II and not under the residuary clause. Visit to Get Source VAT on sale of Duty Entitlement Pass Book (DEPB) - Transaction took place in Tamil Nadu or Maharashtra - Ascertained goods or not - Though DEPB is connected to Tuticorin Port, This then is the only nexus which the State of Tamil Nadu has to the transaction in question and in my considered view, is insufficient to bring the transaction to tax in Tamil Nadu. Visit to Get Source Case Laws: GST 2020 (6) TMI 581 Maintainability of petition - availability of alternative remedy of filing an appeal - Section 107 of CGST Act - HELD THAT:- The petition seeking for quashing of the order dated 5.5.2020 passed by the Joint Commissioner, Central Goods and Service Tax, Audit Commissionerate, Kanpur is dismissed on the ground of alternative remedy. 2020 (6) TMI 580 Restoration of cancelled petitioner's registration - CGST Act - HELD THAT:- in view of the subsequent events, petitioner would like to withdraw the present writ petition and file an appropriate application before the proper officer. The present petition and application are disposed of. All rights and contentions of the parties, including the objection as to the maintainability of such an application are left open. 2020 (6) TMI 579 Reopening of portal for filing of Form GST TRAN-1 - transitional credit - HELD THAT:- Issue Notice. To await the judgment of the Supreme Court in UNION OF INDIA VERSUS BRAND EQUITY TREATIES LIMITED AND ORS. ETC. ETC [2020 (6) TMI 517 - SC ORDER] , list on 16th September, 2020. 2020 (6) TMI 578 Permission to file form TRAN-I - vires of Rule 117(1A) of Haryana GST Rules, 2017 - transitional credit - HELD THAT:- The Petitioner has challenged vires of Rule 117 (1A) of Rules, however we do not think it appropriate to declare it invalid as we are of the considered opinion that Petitioner is entitled to carry forward Cenvat Credit accrued under Central Excise Act, 1944. The Respondents have repeatedly extended date to file TRAN-I where there was technical glitch as per their understanding. Repeated extensions of last date to file TRAN-I in case of technical glitches as understood by Respondent vindicate claim of the Petitioner that denial of unutilized credit to those dealers who are unable to furnish evidence of attempt to upload TRAN-I would amount to violation of Article 14 as well Article 300A of the Constitution of India. The Respondents are directed to permit Petitioner to upload TRAN-I on or before 30.06.2020 and in case Respondent fails to do so, the Petitioner would be at liberty to avail ITC in question in GSTR-3B of July 2020. 2020 (6) TMI 577 Issuance of SCN - vires of Section 66(E)(e) of the Finance Act, 1994 and Section 7(1A) read with Clause 5(e) of Schedule-II of the Central Goods and Services Tax Act - services rendered to the holders of accounts requiring minimum account balance to be maintained - period 1st April, 2013 to 30th June, 2017 - HELD THAT:- Issue Notice. 2020 (6) TMI 576 Jurisdiction - validity of registration with wrong PAN no.- appealable order or not - Section 107 of the Goods and Services Tax Act, 2017 - HELD THAT:- There was a clear cut information from the Income Tax Department to use the one PAN No.AAEAT6828L. Despite that the petitioner had been filing particulars of the invalidated PAN Number on the basis of the Registration Number obtained. The cancellation was with effect from 30th November 2019 and not from 29.9.2018. For all these period, there were no returns, which necessitated the assessing officer to assume the role of best assessment under Section 62 of the Act. Thus for all intends and purposes, there cannot be any bonafide omission or mistake - Petition dismissed. 2020 (6) TMI 575 Outdoor catering services - cancellation of registration of petitioner - HELD THAT:- On juxtaposing of both the notices, show cause notice Ext.P2 is not in order. The reference of date, month, year and time is conspicuously wanting. In my view, the notice lacks the compliance of the principles of audi alteram partem. Accordingly, the notice and the order of cancellation Exts.P2 and P4 are hereby quashed. The matter is remitted to the 2nd respondent to comply with the observation derived from the Form GST REG-17. Petition allowed by way of remand. 2020 (6) TMI 574 Filing of GST TRAN-1 Forms electronically - Appeal by GSTN and GST Council against direction to allow filing of TRAN-1 electronically or in manual form - filing of details in wrong column - Transitional credit - HELD THAT:- The transition from the old regime to the new one as held by the High Court of Delhi in Brand Equity Treaties Limited [ 2020 (5) TMI 171 - DELHI HIGH COURT ] poses formidable and unprecedented problems in successful migration, which could be attributed either to the failure of the system as maintained by the Department or the inexperience of the assessee in the ways and means provided by the new regime. The fact that the petitioner/1st respondent had attempted uploading of the form, within the period is more than established by the system log. The rejection of the return so submitted was due to the wrong table having been filled up, which is not with any ulterior motive; but was only for reason of inadvertence prompted by inexperience. Appeal dismissed. 2020 (6) TMI 573 Profiteering - supply of Refrigerator Whirlpool FP313D PROTTON ROY MIRROR - benefit of reduction in the rate of tax not passed on by way of commensurate reduction in price - contravention of Section 171 of the CGST Act, 2017 - Penalty - HELD THAT:- It is evident from the perusal of Sub-Section 171 (1), 171 (3A) and the Explanation attached to this Section that profiteering pertains to the amount of benefit which has been denied to the recipients by a registered person by not reducing the prices of his products commensurately on which the rate of tax has been reduced. Hence, the definitions quoted by the Respondent from the various dictionaries are not applicable, Similarly, his contention that the above term refers to excessive, exorbitant and unjustifiable profits arising due to supply of essential goods is also not correct. The argument of the Respondent that the marginal notes on anti-profiteering measures attached to Section 171 of the CGST Act, 2017 and Chapter XV of the CGST Rules, 2017 were required to be considered while interpreting the anti-profiteering measures is also not relevant as profiteered amount has been clearly, concisely and appropriately defined in the above Section. Marginal note was only required to be considered in case the above provision of anti-profiteering measures was ambiguous and not clear. Hence, the above contention of the Respondent is untenable. The Respondent is directed to reduce the price of the above product as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit of tax reduction is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount mentioned above along with the interest to be calculated @ 18% from the date from which the above amount was collected by him from the recipients till the above amount is deposited, in terms of the Rule 133 (3) (b) of the CGST Rules, 2017. Since, the recipients in this case are not identifiable, the Respondent is directed to deposit the above amount of profiteering along with interest in the CWFs of the Central and the concerned State Governments as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017 in the ratio of 50:50 along With interest @ 18%, till the same is deposited. Penalty - HELD THAT:- The Respondent has denied the benefit of rate reduction of the GST to the consumers in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and he has thus resorted to profiteering. Hence, he has committed an offence under Section 171 (3A) of the CGST Act, 2017 and therefore, he is apparently liable for imposition of penalty under the provisions of the above Section, Accordingly, Show Cause Notice be issued to him to explain why the penalty prescribed under Section 171 (3A) of the above Act read with Rule 133 (3) (d) of the CGST Rules, 2017 should not be imposed on them. Income Tax 2020 (6) TMI 572 Disallowance of the bad debts written off u/s 36(1)(vii) read with Section 36(2) - income was not offered to tax and there was no subsisting debt perverse - whether debt which was written off during the relevant year was offered to income in Previous year or earlier years? - HELD THAT:- Supreme Court dealt with Section 36(1)(vii) of the Act, which was amended with effect from 01.04.1989 in SOUTHERN TECHNOLOGIES LTD. VS. JT. CIT [ 2010 (1) TMI 5 - SUPREME COURT ] it was inter alia held that after 01.04.1989, a mere provision for bad debt would not be entitled to deduction under Section 36(1)(vii) of the Act. Further held that if an assessee debits an amount of doubtful debt to profit and loss account and credits the asset account like sundry debtors account, it would constitute a right of an actual debt. However, if an assessee debits provision for doubtful debit to profit and loss account and makes a corresponding credit to current liabilities and provisions on the liabilities side of the balance sheet then it would constitute a provision for doubtful debt. It was thus held that in the latter case the assessee would not be entitled to deduction after 01.04.1989. The aforesaid decision was referred to with approval in VIJAYA BANK [ 2010 (4) TMI 46 - SUPREME COURT ] . From the close scrutiny of the orders passed by the assessing officer, Commissioner of Income Tax (Appeals) as well as Income Tax Appellate Tribunal, we find that aforesaid aspect of the matter has not been examined. Therefore, the impugned orders are quashed and the matter is remitted to the assessing officer to ascertain twin questions viz., (i) whether debt which was written off during the relevant year was offered to income in Previous year or earlier years, (ii) whether the assessee has debited the amount of doubtful debt to profit and loss account and has reduced the same from the asset side of the balance sheet. The matter is remitted to the assessing officer for de novo consideration of the aforementioned aspect. 2020 (6) TMI 571 Levying penalty u/s.271(1)(c) - bogus purchases addition - HELD THAT:- We have also given considerable thought to the judgment of the Hon'ble Bombay High Court in the case of Pr. CIT Vs. Mohommad Haji Adam [2019 (2) TMI 1632 - BOMBAY HIGH COURT] wherein it has been held that no ad-hoc addition at the rate of 10% of bogus purchases is warranted. Rather, the addition should be made to the extent of difference between gross profit rate on genuine purchases and gross profit rate of bogus purchases. Reverting to the facts of the present case and taking guidance from the said judgment of the Hon'ble Bombay High Court in the case of Pr.CIT Vs. Mohommad Haji Adam (supra.), we set aside the order of the Ld. CIT(Appeal) and restore the matter back to the file of the Assessing Officer for undertaking this exercise and finding out the excess gross profit rate earned from bogus purchases and then making the addition accordingly after allowing reasonable opportunity of hearing to the assessee. Appeal of the assessee is allowed for statistical purposes. Penalty u/s 271(1)(c) - We set aside the order of the Ld. CIT(Appeals) in this appeal also and remit the matter of penalty issue back to the file of Assessing Officer to adjudicate in view of the quantum matter already in front of him as per law and after providing reasonable opportunity of hearing to the assessee. 2020 (6) TMI 570 Exemption u/s 11 - Assessee did not file Form-10 along with the return of income but filed the same before the AO during the assessment proceedings - AO rejected the plea of the Assessee for accumulation for the reason that Form-10 did not specify the purpose for which the surplus income which is not spent will be utilized in future - HELD THAT:- It is a fact that along with the appeal memo filed in Form-36 the Assessee has also attached a copy of Form-10 filed before the AO. It is therefore, not correct on the part of the Tribunal to observe in the impugned order that Form-10 was not filed before the Tribunal. Apart from the above, also find that along with Form-10, a copy of the Board Resolution of the Assessee trust has been enclosed in which the purpose for which the accumulation is sought is clearly set out as for construction of temple, Upashraya, Dharmashala and objects of the trust . It is thus, clear that the order of the Tribunal suffers from an error apparent on the face of the record which requires to be rectified. The claim of assessee for accumulation ought to have been accepted by the revenue authorities. Even in the order of assessment the AO has accepted that Form-10 was filed by the assessee and the only grievance was that the purpose for accumulation was not mentioned. When the purpose of accumulation as contained in the Board Resolution annexed along with Form-10 was brought to the notice of the ld. CIT(A), he also overlooked the same and concurred with the findings of the AO. Thus, the order of revenue authorities cannot be sustained and the assessee is therefore, entitled to the benefit of accumulation. - Decided in favour of assessee. 2020 (6) TMI 569 Setting up of business during the year under consideration - whether set up of business is only set up or is also commencement of business? - HELD THAT:- We hold that in the case of the assessee where substantial activities were carried out by the assessee, since the date of incorporation which had culminated in raising loans, making investment in purchase of land, which was reflected as stock in trade and also advancing loans to associate concerns for purchasing different pieces of land, in order to fulfil the condition of Land Bank of 100 Acres or more, to develop the township in Haryana and where the assessee is entered into development agreement at the close of the present year/beginning of the next year, then assessee can be said to have set up and commenced its business. Assessee having also invested substantial amount in the purchase of another property in the year itself, thus, set up of its business as per its Memorandum of Understanding was done, since it was engaged in the business of real estate. It is held that there is no merit in the order of the authorities below in this regard and the same are reversed. Accordingly, we hold that the assessee having not only set up its business but had also commenced its business during the previous year itself. Hence, ground no.1 of the assessee is allowed. Allowance of interest expenses - HELD THAT:- Once the business had been set up and also commenced in instant year itself, then the interest expenses claimed by the assessee and any other expenditure claimed by the assessee is to be allowed as business expenditure. The assessee had also parked certain funds temporarily in the bank FDRs, on which it had earned interest which is to include also as business income in the hands of the assessee. Accordingly, ground no 2 and 3 raised by the assessee also stand decided in the favour of the assessee and same is dismissed. Taxability of interest income - HELD THAT:- As held as business income; even otherwise the said interest income needs to be set up of against interest expenditure as funds have been borrowed by the assessee and only surplus borrowed funds have been invested in bank FDRs. Accordingly, the ground no. 5 raised by the assessee is allowed. 2020 (6) TMI 568 TP Adjustment - Disallowance of management fee paid to MAP, Singapore - assessee was a trading company and its operating expenses were to the tune of 40% of the total turnover - whether the Assessing Officer had exceeded the jurisdiction cast upon him, while deciding the issue of allowability of claim of management fees paid by the assessee to its AE? - HELD THAT:- In the present scenario where the assessee is dealing in items, which were available in international market also, then same practice has to be adopted worldwide and hence the necessity of availment of management services. Merely because the assessee was increasing expenditure on its personnel and other expenses, cannot be the yardstick for deciding whether assessee had any need to avail the services. It is outside the domain of Assessing Officer to traverse in such direction. AO categorically states that assessee had availed services in various fields, but it is outside his domain to decide whether there was any necessity to avail such services or not. The assessee having availed the support services for its day to day running of business, is entitled to claim the expenditure. Hence, we hold so. Assessee during the year itself establishes the case of the assessee that the availment of support services from the AE has benefitted the business of assessee and hence expenditure is business expenditure. Now, coming to the next aspect of the assessee i.e. the evidences of availment of support services from the AE. The assessee before us has furnished evidences in the form of additional evidences to establish its case of availment of services. Such evidences are available filed by the assessee in this regard. The sufficiency of availment of services can be gone into by Assessing Officer, but where evidences have been filed, the Assessing Officer cannot sit in judgement as to allowability of expenditure on the surmise that assessee is already increasing expenditure upto 40%. There is no merit in the stand of the authorities below. Disallowance on account of impairment of stock - whether the said expenses would lead to establishment and promotion of Michelin brand in India? - HELD THAT:- Where the assessee is following the systemized way of recognizing the value of stock at the close of the year i.e. as per AS-2 of Accounting Standard and the cost of the closing stock is declared on the basis of cost or net realizable value, whichever is less. Hence, there is no merit in the aforesaid disallowance made in the hands of the assessee. We uphold the order of the CIT(A). Addition on account of AMP expenses - whether the said expenses would lead to establishment and promotion of Michelin brand in India? - HELD THAT:- Looking at the nature of expenses incurred, it is apparent that the same primarily pertain, to sales promotion of the products in Indian market. The expenditure being essentially incurred with the object to boost the sales of the assessee though the brand is owned by the AE does not warrant any disallowance in the hands of the assessee. In the entirety of the facts and circumstances of the case, the entire expenses on advertisement and publicity need to be allowed in the hands as business expenditure of the assessee. Appeal of the assessee is allowed 2020 (6) TMI 567 Stock inventory - reliance on the alleged survey statement without having any corresponding evidence in support - HELD THAT:- Department's having carried out survey action at assessee's business premises allegedly suggesting stock inventory terming subject matter of the impugned addition. We notice from the case records that the clinching aspect which requires our consideration is that the assessee had duly produced item no. KSP/HD/1 as well as books of its sister concern namely M/s. Sree Bishandas Iron Works indicating the impugned differential stock belonging to the said other party only. DR's vehement contention seeking to rely on the assessee's alleged survey statement goes contrary to the CBDT circular issued way back on 10.03.2003 that mere search/survey statements. do not carry any significance without supportive evidence. We go by the very analogy in the facts of this case and hold that the mere reliance on the alleged survey statement without having any corresponding evidence in support would not help the Revenue's case. We thus affirm CIT(A)'s action deleting the impugned addition. The Revenue fails in its former substantive grievance. Unexplained cash credits - HELD THAT:- We note during the course of hearing that not only the assessee had proved identity, genuineness and creditworthiness of both these entities right in scrutiny but also the said entities duly responded to the Assessing Officer's verification exercise. Coupled with this, we are informed in the light of the lower appellate findings that the impugned unsecure loans already stand paid (supra). All these clinching aspects have gone unrebutted from the Revenue side. We therefore hold in these facts and circumstances that the CIT(A) had rightly deleted the impugned unexplained cash credits addition as well as interest payment in lower appellate discussion. The same stands affirmed. The Revenue's instant second substantive ground is also declined. 2020 (6) TMI 566 Estimation of income - Rate of Gross profit (GP) - rejection of books of account - HELD THAT:- GP so declared in the earlier years is not in dispute as there is no finding that in the past, the assessee has obtained any accommodation entries as in the instant year and therefore, the contention of the ld DR that the past history cannot form the basis for estimating current year GP cannot be accepted. Once the past year results have attained finality and not in dispute, the same can form the basis for estimating the GP rate for the current year. It is clear from the details of the GP declared by the assessee for the preceding three years that the average of past three years of GP declared by the assessee comes to 10.22%. GP declared for the year under consideration at 10.04% is lower than the average GP declared by the assessee in preceding three years by 0.18%. The rejection of books of account by invoking provisions of Section 145(3) of the Act shall lead to estimation of income of the assessed based on some reasonable and proper criteria. Since the average of past history of GP declared by the assessee is considered as a proper and reasonable basis for estimation of income for the year after rejection of books of account, therefore, the GP is estimated at 10.22% as against GP declared by the assessee at 10.04% for the year under consideration and differential trading addition equivalent to GP rate of 0.18% on declared turnover is upheld and the appeal of the assessee is partly allowed. For A.Y 2012-13, the assessee has declared GP of 10.57%. If we consider the average GP for past 5 years which has been declared and accepted by Revenue and has attained finality, excluding A.Y 2009-10 where GP so declared has not been accepted by the Revenue on account of accommodation entries, it comes to 10.15%. Thus, the GP declared by the assessee is more than the average GP of past years and even where the books of accounts are rejected, no trading addition is called for and the appeal of the assessee is thus allowed. For A.Y 2013-14, the assessee has declared GP of 9.01% which is lower than the average GP for past 5 years which comes to 10.15%, computed after excluding GP declared for A.Y 2009-10 and A.Y 2012-13, the GP is thus estimated at 10.15% as against GP sustained by the ld CIT(A) at 11.50% and GP of 9.01% declared by the assessee for the year under consideration and differential trading addition equivalent to GP rate of 1.14% on declared turnover is upheld and the appeal of the assessee is partly allowed. For A.Y 2014-15, the assessee has declared GP of 9.54% and we consider the average GP for past 5 years, it comes to 10.15%, computed after excluding GP declared for A.Y 2009-10 and A.Y 2012-13 and A.Y 2013-14, thus the GP for the year is estimated at 10.15% as against GP sustained by the ld CIT(A) at 11.50% and GP of 9.54% declared by the assessee for the year under consideration and differential trading addition equivalent to GP rate of 0.61% on declared turnover is upheld and the appeal of the assessee is partly allowed. 2020 (6) TMI 565 Late filing fee U/s 234E - Intimation U/s 154 r.w.s. 200A - delay in filing quarterly statement - HELD THAT:- As regards the quarterly TDS statements for the F.Y. 2016-17, the assessee initially filed statements on 12/06/2017 and consequently the A.O. issued intimation u/s 200A of the Act on 15/06/2017 whereby the adjustment on account of late filing fee u/s 234E of the Act was made by the A.O. These facts are not in dispute in so far as the delay in filing the quarterly statements. Since the assessee has filed rectification statements on 05/04/2018, therefore, the A.O. has again issued intimation U/s 154 r.w.s. 200A - assessee has not pointed out any mistake in issuing the intimation by the A.O. on account of computation of period of delay or quantification of the late filing fee U/s 234E of the Act. As far as merits of the appeals are concerned, we do not find any substance or merits in these appeals as the delay in filing the quarterly statement is accepted by the assessee. Explanation for such delay in filing quarterly statement - Since the levy of late fee as prescribed U/s 234E of the Act is mandatory and consequential, therefore, the same cannot be deleted on the ground of reasonable cause as explained by the assessee. It is pertinent to mention that though the intimation issued U/s 200A of the Act is an appealable order, however, the said order can be challenged only on the ground that the adjustment made by the A.O. or intimation issued U/s 200A of the Act is not in accordance with the provisions of Section 234E or Section 200A of the Act. Only if the A.O. has failed to comply with the mandatory provisions of these Sections while making the adjustment and issuing the intimation, the same can be challenged in the appeal. In absence of any such allegation that the A.O. has violated any of the provisions of Section 234E or Section 200A of the Act, the adjustment made by the A.O. on account of late filing fee U/s 234E of the Act cannot be deleted. - Decided against assessee. 2020 (6) TMI 564 Treatment of expenditure - Revenue or capital expenditure - assessee is engaged in the business of manufacturing and sale of on-road automobiles, agricultural tractor implements, engine parts and accessories of motor vehicle rendering services, property development activity, financing, investment and transport solutions - HELD THAT:- Expenditure incurred in connection with acquisitions, shall have to be treated as capital expenditure and shall form part of cost of investment which the assessee could claim as cost at the time of sale of investment. A sum as represent expenditure incurred in respect of acquisitions which never materialised and hence, squarely allowable as revenue expenditure in as much as no capital asset came into existence of the assessee which would derive enduring benefit of the assessee. Allowability of deduction towards provision for warranties - HELD THAT:- There is no dispute with regard to the claim of deduction for provision for warranty based on scientific working and analysis made by the assessee and in order to avoid multiplicity of proceedings we are inclined to allow the claim of provision for warranty - ground raised by the assessee is allowed. Disallowance u/s 14A r.w.r 8D - HELD THAT:- Both the parties fairly agreed that only those investments which had actually yielded exempt income during the year to the assessee are to be considered for the purpose of working out the disallowance made in the third limb of Rule 8D(2) of the Rules. This issue is now very well settled by the decision of ROTORK CONTROLS INDIA (P) LTD. VERSUS COMMISSIONER OF INCOME TAX, CHENNAI [ 2009 (5) TMI 16 - SUPREME COURT], we direct the ld. AO to consider only those investments which had actually yielded exempt income during the year while working out the disallowance under third limb of Rule 8D(2) of the Rules. Transfer pricing adjustment made in respect of corporate guarantee fee - HELD THAT:- ALP of corporate guarantee fee in respect of old guarantees to be determined at 3% in line with the decision take by this Tribunal for A.Y.2009-10 as the matter is pending before the Hon ble Jurisdictional High Court in assessee s own case. In respect of fresh guarantees issued during the year, the ALP of the same should be determined at 1%, being the same rate already disallowed by the assessee in the return of income, despite the aforesaid jurisdictional High Court decision holding the rate to be at 0.5%.While recomputing this disallowance, it is needless to mention that the ld. AO should reduce the amount already disallowed towards guarantee fee by the assessee in the return of income. ALP adjustment made in respect of interest on loan to AE - HELD THAT:- DR submitted that let the ld. TPO be directed to adopt LIBOR + 300 basis points for benchmarking international transaction in respect of loan given to AE. But we find that this Tribunal in assessee s own case for the A.Y.2009-10 had specifically directed to consider only LIBOR rate at the relevant time and determined the ALP of the said transaction accordingly. Respectfully following the said judicial precedent, we direct the ld. AO accordingly Disallowance made u/.s.40(a)(ia) of the Act in respect of year end provisions - HELD THAT:- Entire break-up had been duly submitted by the assessee before the lower authorities and the same are enclosed in page 234 of the paper book and the figures mentioned thereon are fairly ascertainable and are not mere adhoc provisions. Respectfully following the said decision of the Tribunal in assessee s own case for A.Y.2009-10,[ 2019 (4) TMI 1867 - ITAT MUMBAI] we have no hesitation in directing the ld. AO to delete the disallowance u/s. 40(a)(ia) Treatment of industrial promotion subsidy incentive to be treated as capital receipt - See SHREE BALAJI ALLOYS [ 2016 (4) TMI 1161 - SC ORDER] and M/S. CHAPHALKAR BROTHERS PUNE [ 2017 (12) TMI 816 - SUPREME COURT] Treatment of industrial promotion subsidy incentive - Revenue or capital receipt - HELD THAT:- As relying on PONNI SUGARS CHEMICALS LTD. [ 2008 (9) TMI 14 - SUPREME COURT] we direct the ld. AO to treat the receipt of industrial promotion subsidy incentive under the 2007 incentive scheme as capital receipt Disallowance of deduction of difference in exchange rate - exchange loss debited to 'Foreign Currency Monetary Item Translation Difference Account' is written-off to the profit loss account over the life of the corresponding foreign currency loans - HELD THAT:- Foreign currency loans utilised for acquiring fixed assets and overseas investments is to be capitalised and correspondingly depreciation need to be granted to the assessee. In this, the exchange loss pertaining to the period till the asset was put to use should alone be capitalised and thereafter, the same should be allowed as revenue expenditure. Foreign exchange loss attributable to other monetary items debited to FCMITA as per AS 11 of ICAI should be allowed as revenue expenditure. Allowability of expenses on Employees Stock Options (ESOP) - HELD THAT:- We find that the ld. AR fairly submitted that in principle, this issue is decided in favour of the assessee by the Special Bench in the case of Biocon Ltd. [ 2013 (8) TMI 629 - ITAT BANGALORE] but still in the interest of justice, a specific direction need to be given to the ld. AO to allow deduction in respect of all options exercised during the year equal to the difference between the exercise price and the market price at the time of exercise of the option, as held in the case of Biocon Ltd, instead of the market price at the time of grant of option. We find lot of force in the said argument of the ld. AR and direct the ld. AO accordingly. Accordingly, the concise ground raised by the assessee is allowed for statistical purposes. Deduction of provision for post retirement scheme for housing and for post retirement medical schemes - HELD THAT:- This issue under dispute is squarely covered in favour of the assessee by the coordinate bench decision of this Tribunal in the case of Hindustan Petroleum Corporation Ltd. [ 2014 (7) TMI 290 - ITAT MUMBAI] . We have gone through the said Tribunal order and find that this issue is squarely decided in favour of the assessee on similar facts and circumstances. We also find that assessee had filed a modified ground of appeal before us on without prejudice basis that in any case, at least the actual payment made during the year towards post retirement scheme for housing and post retirement medical benefit should be allowed as deduction. We find that assessee is indeed entitled for deduction on provision basis itself and hence, it is not required to adjudicate the modified ground of appeal filed before us and the ld. AO is hereby directed to grant deduction for provision for post retirement scheme for housing in the sum and post retirement medical scheme in the sum while giving effect to this order. Scheme of reduction for legal fees recovered but disallowed on gross basis - HELD THAT:- It is not the case of the revenue that the claim made by the assessee herein to reduce the same is ingenuine. We would like to place reliance on the decision of the Hon ble Jurisdictional High Court in the case of Pruthvi Brokers and Shareholders Pvt. Ltd.. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] and accordingly, entertain the claim of the assessee and direct the ld. AO to reduce a sum of ₹ 3,33,56,000/- from the total income while giving effect to this order. Taxability of interest income on tax free bonds - HELD THAT:- It is not in dispute that the said interest income is not liable for taxation. Merely, because the assessee had erroneously offered a particular sum for taxation, the revenue cannot take advantage of the ignorance of the assessee and bring to tax a receipt which is outside the ambit of definition of income under the Act. Direct the ld. AO to exclude from the total income a sum towards interest on tax free bonds by granting exemption for the same while giving effect to this order. Capital gain computation on sale of land - reference to DVO - AO adopted the valuation determined by the Stamp Valuation Authority and observed that the sale is higher than the sale consideration received by the assessee and accordingly computed the capital gains in terms of Section 50C - allowability of the tolerance limit of 5% to 10% range variation - HELD THAT:- We find that the ld. AR made elaborate arguments disputing the valuation report given by the DVO by suggesting various reasons. He also pleaded that any variation in full value of consideration between the DVO report and the actual sale consideration cannot be automatically treated as income and tolerance limit of 5% to 10% range should be granted to the assessee. We find that valuation report of DVO had been received after the order of ld. DRP and hence, the ld. AO did not have the benefit of the said DVO report either while framing the assessment or while giving the effect to the order of ld. DRP. Hence, in the interest of justice and fair play, we deem it fit and appropriate to remand this issue to the file of the ld. AO with a direction to recompute the capital gains on sale of land in terms of Section 50C(2) of the Act based on the reports obtained from DVO in respect of the subject mentioned properties. The assessee is at liberty to make all arguments including seeking relief of the tolerance limit of 5% to 10% variation in sale consideratiuon vis- -vis the consideration fixed by the Stamp Valuation Authority or consideration adopted by the DVO. Deduction u/s.80IC in respect of Rudrapur unit of the assessee - HELD THAT:- We find for A.Y.2009-10, reference to Transfer Pricing Officer under the category of specified domestic transactions, were not provided for in the statute at the relevant point of time. Whereas for A.Y.2013-14 i.e. the year under appeal, the statute had duly provided for determining of arm s length price in respect of specified domestic transactions. It is not in dispute that the transactions of Rudrapur Unit duly fall within the ambit of specified domestic transactions . Hence, we hold that once the profitability disclosed by the assessee for Rudrapur unit had been accepted to be at arm s length by the ld. TPO in the transfer pricing adjustment, the same cannot be further disturbed by the ld. AO by making some disallowance or by adopting different method of determining the profitability and especially in view of the fact that no adverse findings were recorded by the lower authorities, with regard to profitability of Rudrapur Unit. In view of the aforesaid findings, we direct the ld. AO to accept the claim of deduction u/s.80IC of the Act made by the assessee in the return of income. Determination and carry forward of long term capital loss in respect of shares held in Mahindra Shubhlabh Services Ltd., arising upon reduction in share capital by that company - HELD THAT:- We find that the lower authorities had not allowed the loss by placing reliance on the decision of the Special Bench of Mumbai Tribunal in the case of Bennett and Coleman Co. Ltd., [ 2011 (9) TMI 1 - ITAT MUMBAI] wherein it was held that capital loss on reduction of share capital cannot be allowed. We find that the ld. DRP erred in holding that requisite evidence was not available during the hearing to substantiate that Mahindra Shubhlabh Services Ltd., is not a wholly owned subsidiary of assessee company. AR submitted that assessee holds 83.05% shares in Mahindra Shubhlabh Services Ltd., which was duly substantiated before the ld. DRP. We find that reduction of share capital had taken place in paid up value of equity shares in terms of Section 100 of Companies Act 1956. We find that there was extinguishment of the rights of the assessee and hence, this reduction has resulted into a capital loss in the hands of the shareholder i.e. assessee company. In the instant case, there is absolutely no dispute that the assessee company i.e. Mahindra and Mahindra Ltd., received no consideration on reduction of capital - Decided against assessee Additional ground for non-taxability of interest on tax free bonds - computation of income for both under normal provisions of the Act as well as in computation of profits u/s.115JB of the Act - HELD THAT:- Additional ground deserves to be admitted as it does not involve verification of the primary facts on record and more especially in view of the undisputed fact that the entire details of interest income had been duly filed before the ld. AO by the assessee during the course of assessment proceedings. Admittedly, the said interest income included interest earned on tax free bonds which is not liable for taxation at all both under normal provisions of the Act as well as in the computation of book profits u/s.115JB Merely because, the assessee had erroneously offered the same in the return of income, the same cannot be brought to tax by the revenue. The law is now well settled that only just and right tax should be collected from the right person by the revenue. Hence, we deem it fit and admit the additional ground and direct the ld. AO to reduce the sum towards interest income on tax free bonds both under normal provisions of the Act as well as in the computation of book profits u/s.115JB of the Act. We also place reliance on the decision of Pruthvi Brokers and Shareholders Pvt. Ltd. [ 2012 (7) TMI 158 - BOMBAY HIGH COURT] in support of the proposition. Accordingly, the additional ground No.2 raised by the assessee is allowed. Allowance of weighted deduction u/s.35(2AB) - HELD THAT:- To grant additional deduction of ₹ 106.59 Crores u/s.35(2AB). The assessee to furnish amended form 3CL issued by DSIR in respect of Swaraj R D complex and on verification of the same, the ld. AO is directed to decide the allowability for claim of deduction u/s.35(2AB) of the Act thereof. TDS u/s 194H - dealer incentive paid by the assessee - disallowance u/s.40(a)(ia) - HELD THAT:- Relationship of principal and agent does not exist between the company and dealer. Since the dealer does not render any services to the company, in lieu of incentives received by them, the question of deduction of tax at source on the said payment within the ambit of Section 194H of the Act does not arise. We find that the ld. AO however, did not agree to the said proposition of the assessee and concluded that the dealer has rendered services in the course of buying and selling of vehicles by acting in the capacity of agent and that there is no difference between the term discount and commission . With these observations, the ld. AO concluded that the said payment would fall within the ambit of Section 194H of the Act warranting deduction of tax at source, for which there would be disallowance u/s.40(a)(ia) of the Act was made in the assessment. We find that this issue has already been decided in favour of the assessee for A.Y.2008-09 as confirmed by SC [ 2018 (7) TMI 635 - SC ORDER] Seeking benefit of set off of brought forward loss and unabsorbed depreciation relating to demerged business of Mahindra Automobile Distributor Pvt. Ltd. (MADPL) - HELD THAT:- We find that assessee company had claimed set off of brought forward loss and unabsorbed depreciation relating to demerged business of MADPL in the return of income. However, the ld. AO had allowed the said benefit based on the assessed loss of MADPL. We find that MADPL is in appeal for differential amount of loss. In case if MADPL succeeds in appeal and becomes entitled to the full or part loss of ₹ 108.13 Crores then, correspondingly, the availability of business loss and unabsorbed depreciation loss in the hands of the assessee company for set off would also increase. Hence, in the interest of justice and fair play, we deem it fit and appropriate to give the direction to the ld. AO to modify the assessment order and allow the loss to the assessee company as consequential effect consequent to determination of final loss of MADPL. 2020 (6) TMI 563 Revision u/s 263 - AO had failed to refer to the TPO under section 92CA related party transactions which is falling within the meaning of 'specified domestic transactions' u/s 92BA(i) to arrive at the Arm's Length Price (ALP) u/s 92C of the Act as required in terms of CBDT InstructionNo. 3/2016 dated 10.03.2016 - HELD THAT:- In Coordinate Benches [in the case of Swastik Coal Corporation Pvt Ltd [ 2019 (7) TMI 1486 - ITAT INDORE] we hold that since clause (i) section 92A was omitted with effect from 1st April, 2017 and the effect of such omission is that the said clause(i) was never existed in the statute. Hence, Ld. PCIT can not exercise the jurisdiction u/s 263 of the Act. As the issue is squarely covered in favour of the assessee by the decision of the Coordinate Benches (supra), and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of Coordinate Bench. We uphold the contention of the assessee and quash the order passed by the ld PCIT under section 263 of the Act. - Decided in favour of assessee. 2020 (6) TMI 562 Addition on account of Sundry Creditor merely for want of PAN of those sundry creditors - HELD THAT:- In compliance to the summon issued u/s 131 of the Income Tax Act, 1961, three creditors namely: Shri Nayanmoni Das, Shri Jagadish Das and Shri Shankarlal Agarwal appeared before the assessing officer on 08.12.2016 and 09.12.2016. They were examined and separate statements under section 131 on oath recorded and placed on record by the assessing officer. These three persons also filed before the assessing officer the requisite details and documents as called for by summon issued under section 131 - AO failed to demonstrate any defect in the documents and evidences adduced before him by these creditors. Out of total creditors which were alleged by the AO to be not genuine, as sum pertain to preceding previous years which have been verified by the AO in the preceding previous years, therefore genuineness of these creditors should not be doubted. All the creditors of the assessee are his regular vendors and transactions with them are genuine business transactions and these transactions with them had been undertaken wholly and exclusively for the purposes of the business activities. We note assessee's accounts are audited and not rejected by the AO therefore to estimate the separate profit in addition to profit shown in the audited books of accounts is not tenable without any tangible material or corroborative evidence. We note that since the assessment year under consideration is 2014-15 therefore furnishing of PAN number is not mandatory as per Rule 115B of the Income Tax Rules, vide entry No. 18, which came into force with effect from 1stJanuary, 2016. Based on the factual position,as narrated above, we are of the view that the assessee has proved the identity, creditworthiness and genuineness of the creditors, therefore we delete the addition. - Decided in favour of assessee. 2020 (6) TMI 561 Addition made u/s 69C - Unexplained huge expenditure to earn Agriculture income - assessee has used his own wells for irrigation and farm yard manure from his cattle shed, the estimated expenditure - HELD THAT:- In this case, the agricultural land holding of the assessee is not in dispute and moreover, the agricultural income earned by the assessee was from coconut trees and mango trees and not from raising paddy, etc. for which various agricultural operations are to be carried out. AO has not shown any basis for estimating percentage of expenditure for the income from coconut trees and mango trees. Without making any physical verification of the number trees of coconut and mango, usage of water for irrigation purposes, etc. the AO was not justified in treating the agricultural income as excessive and proceed to make estimation. On similar views, the ld. CIT(A) has deleted similar addition made by the Assessing Officer for the assessment year 2013-14 in the case of assessee individual [Dr. V. Anand] vide order dated 30.09.2016. Over and above, once the assessee has not made any investment, the addition made under section 69C of the Act is illegal as has been rightly observed by the ld. CIT(A) - Decided in favour of assessee. Customs 2020 (6) TMI 560 Seizure of Gold - provisional release of goods - Section 110(2) of the Customs Act 1962 - HELD THAT:- The facts with regard to seizure of the gold the extension of time and its communication to the petitioner much less issuance of the ordinance are not in dispute. Sub-Section 2 of Section 110 of the Customs Act and proviso added later on enables the Principal Commissioner of Customs or Commissioner of Customs to give further period of six months by informing the person after recording the reasons which, in the instant case has already been done. However, the extension would not come into play in case the goods are provisionally released under Section 110(a). The equity can be struck by issuing directions to the respondent for deciding the request submitted vide Ext.P5 for provisional release of the goods in accordance with law after affording an opportunity of hearing to the petitioner - Petition disposed off. Securities / SEBI 2020 (6) TMI 559 Maintainability of the Writ Petition - whether IGRP of the First Respondent has jurisdiction to re-examine the complaint of the Third Respondent pursuant to the direction issued by the Second Respondent after having arrived at the conclusion that the admissible claim of the Third Respondent against the Petitioner was 'NIL' and relegated the parties to take further course of action under the Exchange Regulations in the earlier order dated 18.10.2016, which has attained finality having remained unchallenged in the manner recognized by law - HELD THAT:- There cannot be any doubt that the attempt to re-examine the complaint of the Third Respondent against the Petitioner by IGRP of the First Respondent without any specific provision to that effect in IGRM devised by the Second Respondent in Circular No. CIR/MRD/ICC/30/2013 dated 26.09.2013, which certainly amounts to re-litigation, is barred. Inasmuch as the earlier adjudication in IGRP of the First Respondent, which culminated in its order dated 18.10.2016, does not suffer from any procedural defect, the question of invoking the inherent powers to re-open the proceeding does not arise. Though a faint plea is made by the Third Respondent that the Petitioner has played a fraud on him, the letter dated 04.10.2018 issued by the Second Respondent to the First Respondent to re-examine the complaint of the Third Respondent does not suggest of the same. What has been mentioned therein is that the Second Respondent has independently examined the complaint and those findings are examined to initiate appropriate measure as per regulation. A preliminary opinion and no definite conclusion on the culpability of the Petitioner has been expressed to treat that any fraudulent act has been committed by the Petitioner against the Third Respondent. As such, it is not possible to uphold the re-examination of the complaint on the ground of exercise of inherent powers for any act of fraud committed by the Petitioner against the Third Respondent. There is nothing which precludes the Third Respondent to rely on any new evidence which has come to his knowledge after the order dated 18.10.2016 passed by IGRP of the First Respondent in arbitration, which is in the nature of an original proceeding. It is needless to add here that no view has been expressed by this Court on the merits of the disputes between the Third Respondent and the Petitioner, and no authority shall be inhibited or influenced by any of the observations made in this order while adjudicating the same. The letter dated 04.10.2018 sent by the Second Respondent to the First Respondent insofar as it suggests that IGRP of the First Respondent may re-examine the complaint of the Third Respondent, is quashed as without jurisdiction and the First Respondent shall be restrained from continuing with the IGRP proceedings initiated in pursuance thereof. It is needless to clarify here that it is for the Second Respondent to exercise its powers conferred under the statute to first make necessary amendments to IGRM so as to create provision for review of an earlier decision of IGRP of a stock exchange, if it so intends, and thereafter require the First Respondent to act in furtherence thereof. Insolvency & Bankruptcy 2020 (6) TMI 558 Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - failure to comply the statutory provision of Section 9(3)(b) of the Code - time limitation - HELD THAT:- On perusal of e-mail correspondence dated 19th January 2018 and 09th April 2018 it is clear that the Operational Creditor has issued the statement of account of pending invoices as on January 19, 2018. This statement pertains to the financial year 2015-16, 2016-17 and 2017-18. In reply to the said mail, the Corporate Debtor has submitted that the account had already been settled with Mr Anumod Sharma and further no services were required. It also transpired that the Corporate Debtor raised a question on raising the bill for the year 2017-18, partially for the year 2016-17. It is also apparent that the Corporate Debtor advised to the Operational Creditor not to raise, such kind of bills and take clarity from Mr Anumod Sharma, as the Company is not liable for the same - Thus, it is clear that before issuance of demand notice there was a pre-existing dispute regarding raising of invoices for the financial year 201718, and partially for 2016-17, on the pretext that the Corporate Debtor had already informed that no services were required. In the instant case, after receiving the demand notice Corporate Debtor within ten days of receipt of the demand notice raised the dispute of the unpaid operational debt. Therefore, affidavit in compliance of Section 9(3)(b) could not be submitted. Thus, it is apparent that there is no default in not providing the affidavit in compliance of Section 9(3)(b) of the Code. Time Limitation - HELD THAT:- On perusal of the record, it is crystal clear that about one year before the issuance of demand notice, the Corporate Debtor complained about the quality of service to the Operational Creditor and communicated that he has not provided services after 2015 and also informed that their services are no longer required. Thus, the Adjudicating Authority/National Company Law Tribunal, New Delhi Bench has rightly rejected the Application filed under Section 9 of the Insolvency and Bankruptcy Code 2016 - appeal dismissed. 2020 (6) TMI 557 CIRP process - application was admitted by the Adjudicating Authority by impugned Order dated 22nd October, 2019, against Corporate Debtor, the present Appeal by Director of the suspended Board of Corporate Debtor - dispute of limitation - Tribunal has concluded that a Decree cannot be executed by resorting to Application under Section 7 and the debt does not become in default when Judgment and Decree is passed by DRT - HELD THAT:- It is clear from the judgments of Hon'ble Supreme Court referred by this Tribunal in the matter of SH G ESWARA RAO VERSUS STRESSED ASSETS STABILISATION FUND, M/S SARITHA SYNTHETICS AND INDUSTRIES LTD. [ 2020 (5) TMI 424 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] that the applicable provision is Article 137 of the Limitation Act 1963 and the relevant date is date of default for the purpose of Application under Section 7 or Application under Section 9 of Insolvency and Bankruptcy Code, 2016. Once, the time starts running, subsequent filing of the Application to DRT and judgment passed by DRT does not make a difference, for the purposes of provisions of I B Code. We further reject the submission that because in Section 3(10) of I B Code in definition of Creditor the decree holder is included it shows that decree gives cause to initiate application under Section 7 of I B Code. Section 3 is in Part I of I B Code. Part II of I B Code deals with Insolvency Resolution And Liquidation For Corporate Person , has its own set of definitions in Section 5. Section 3 (10) definition of Creditor includes financial creditor , operational creditor decree-holder etc. But Section 7 or Section 9 dealing with Financial Creditor and operational creditor do not include decree-holder to initiate CIRP in Part II. The impugned order passed by Adjudicating Authority is set aside and the Application under Section 7 of I B Code filed by the Respondent is dismissed - appeal allowed. 2020 (6) TMI 556 Institution of suit or other legal proceedings on behalf of the 'Corporate Debtor' under Liquidation - jurisdiction of NCLT ordering Liquidation - HELD THAT:- From clause (d) of section 11, it is clear that a 'Corporate Debtor' in respect of whom a liquidation order has been made is not entitled to make application to initiate 'Corporate Insolvency Resolution Process' under Chapter II. That means, it cannot file any application under section 7 or 9 of the I B Code. Therefore, no application under Chapter II can be filed by the 'Corporate Debtor', which is under Liquidation of which the Appellant is Liquidator. In so far as, sub-section (5) of section 33 is concerned, it is subject to section 52. Section 52 relates to right of secured creditor in liquidation proceedings. If the Adjudicating Authority has refused to grant permission to file application under section 9 of the I B Code, we are not inclined to interfere with the impugned order dated 30th May, 2019 - Appeal dismissed. 2020 (6) TMI 555 Disciplinary Action against the Insolvency Resolution Professional (IRP) - Contravention of provisions of the Code, Regulations, and directions issued thereunder on the part of Insolvency Professional - Regulation 11 of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016 read with Section 220 of the Insolvency and Bankruptcy Code, 2016 (Code) - HELD THAT:- A key supporting institution under the Code is insolvency profession. An IP exercises the powers of the Board of Directors of the firm under resolution, manages its operations as a going concern, and complies with applicable laws on behalf of the firm. He conducts the entire insolvency resolution process: he is the fulcrum of the process and the link between the Adjudicating Authority and stakeholders - debtor, creditors - financial as well as operational, and resolution applicants. The process culminates in a resolution plan that maximises the value of assets of the firm. This presupposes availability of many competing resolution plans and identifying the best of them. The key is generation of many promising resolution plans. This requires provision of and access to complete and accurate information about the firm for prospective resolution applicants and continued operation of the firm. The Code casts this duty on the IP. He organises all information relating to the assets, finances and operations of the firm, receives and collates the claims, prepares information memorandum, and provides access to relevant information, so that there is complete symmetry of information among the entitled stakeholders, while maintaining confidentiality. He thus addresses the market failure arising from information asymmetry. The resolution balances the interests of the stakeholders. This requires the services of a third person who does not side with any stakeholder and has no conflict of interests. The law casts this duty on the IP and makes several provisions to ensure his integrity, objectivity, independence and impartiality. It also requires him to be a fit and proper person. Given the responsibilities, an IP requires the highest level of professional excellence. DC observes that Mr. Aran Kumar Gupta displayed a casual approach during the conduct of CIRP. When a CD is admitted into CIRP, the Code shifts the control of a CD to creditors represented by a CoC for resolving its insolvency. The CoC holds the key to the fate of the CD and its stakeholders. Thus, several actions under the Code require approval of the CoC. The RP has displayed utter misunderstanding of the provisions of the Code and Regulations made thereunder. He has contravened the provisions. The DC is conscious of the fact that the profession of IP is in a stage in which IPs are striving to learn. Even though it is incumbent upon them to build and safeguard the reputation of the profession which should enjoy the trust of the society and inspire confidence of all the stakeholders, they may not be kept away from practicing the profession especially in the absence of any malafide intention and more so when the objective of the Code i.e. resolution has been achieved within the prescribed timelines. The RP is hereby warned to be extremely careful and diligent while performing his duties under the Code. Further, he must strictly act in accordance with the provisions of law and similar contraventions shall not be repeated. Service Tax 2020 (6) TMI 554 Validity of SCN - Intellectual property service - appellant had incurred various expenses which were recorded in their accounts as Foreign Expenses (Miscellaneous Foreign Expenses) - period 2006-07 to 2007-08 - Case of appellant is that the SCN is so vague that it does not even specify the taxable service for which these demands were made - HELD THAT:- The appellant has not been put to notice alleging that they have either rendered a taxable service which made them liable to pay service tax or have received any taxable service from overseas service provider, which rendered them liable to service tax under the reverse charge mechanism. As the show cause notice is very vague and wants to charge service tax only on the ground that the appellant had made some payments to their overseas counterparts, the impugned order needs to be set aside. If the allegations in the show cause notice are true, the department could have undertaken more serious investigations using all the powers available to the officers under the law including taking legal action against anyone dishonouring the summons. However, this cannot be a ground to issue a show cause notice without clarifying under what head the tax has to be paid and for which taxable services received by the appellant. The impugned order confirming demands made in such a nebulous show cause notice is bad in law and cannot sustain and needs to be set aside. Appeal allowed - decided in favor of appellant. Central Excise 2020 (6) TMI 553 Pending appeal or not - HELD THAT:- Since, it is submitted by the learned Advocate for the petitioner that service has already been effected upon the respondents, the respondents are at liberty to file affidavit-in-opposition within a period of three weeks from date, affidavit-in-reply thereto, if any, be filed within two weeks thereafter. Matter to appear in the monthly list for the month of August, 2020 under the heading for hearing . In the meantime without prejudice to the rights and contentions of both parties, the petitioner shall deposit a sum of ₹ 15 lakhs with the learned Registrar General of this Court by a bank draft within 15 (fifteen) days from date. 2020 (6) TMI 552 Demand of Central Excise Duty - demand against the appellant on the ground of denial of self-credit by denying the benefit of exemption Notification No.01/2010-CE dt.6.2.2010 to the appellant - HELD THAT:- In this matter, the demand has been raised consequent to denial of exemption Notification No.01/2010-CE dt. 6.2.2010 by the Commissioner (Appeals). As the said order of the Commissioner (Appeals) has already been set aside by this Tribunal vide order dt.20.5.2019, in that circumstance, the benefit of exemption Notification No.01/2010-CE dt.6.2.2010 is available to the appellant. Therefore, the proceedings were not warranted against the appellant. Appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2020 (6) TMI 551 Maintainability of appeal - failure to make pre-deposit as per Section 62(5) of the Punjab Value Added Tax Act, 2005 - request for waiver of pre-deposit - HELD THAT:- The petitioner had exercised the right of appeal which is subject to the condition. The mere fact that its account has been declared as Non- Performing Asset would not empower the Appellate Authority to waive off pre-deposit - The petitioner has failed to make out any case for interference under Article 226 of the Constitution of India. Petition dismissed. 2020 (6) TMI 550 Maintainability of Review Petition - time limitation - no sufficient ground has been given in the Application for condonation of delay - HELD THAT:- There is limitation prescribed for six months for filing the review application. Even thereafter, for more than 500 days, the review application was not filed. The issuance of notice in the remand proceedings by the Assessing Authority itself cannot be a ground for condoning the delay. The issue that the assessment was not finalised within the reasonable time is not a pure question of law but would depend upon the factual aspect of each case. In the present case, apart from six months prescribed limitation, there is delay of 505 days, the explanation put forth is not worth acceptance. Appeal dismissed. 2020 (6) TMI 549 Classification of goods - Black Disinfectant Fluid (BDF) - whether covered by Entry 25 of Schedule C of HVAT Act and is therefore leviable to tax at concessional rate as Schedule C item, whereas the Entry 25 of the HVAT Act deals with specific items and BDF does not found mentioned therein - HELD THAT:- The conclusion arrived at by the Tribunal is in consonance with common parlance test. The assessee produced letter dated 7.1.2016 received from the Assistant State Drug Controller, Haryana under the Right to Information Act,2005. The letter stated that BDF is manufactured under Schedule O of the 1940 Act and falls in the category of 'drugs' defined in Section 3(b) of the said Act. The information is provided by the official of the office dealing with the said product and issuing licence under the 1940 Act for manufacture of BDF - There is no contradiction by the State to the contention that BDF is used as a disinfectant to sterilize houses, hospitals, veterinary hospitals etc. and that the product is also applied to the wounds of animals to kill maggots, worms etc. in the wounds. The case of the appellant is that BDF be treated to be covered under the residuary entry. The contention lacks merit. Resort to residuary entry can only be made if the product is not covered under a specific Entry - BDF is covered under Entry 25 of Schedule C of the 2003 Act. No interference is called for in the order of the Tribunal - Appeal dismissed. 2020 (6) TMI 548 Rate of tax - classification of goods - sales of sports shoes and sports apparel - whether taxable under Entry 46 and Entry 52 of IV Schedule respectively, or they fall under the residuary entry falling under V Schedule? - HELD THAT:- The term Footwear in Entry 46 of IV Schedule includes sports shoes and the D.C.T.O.- II (Enforcement Wing) could not have held that they fall under residuary entry under V Schedule, and he ought to have held that they fall under Entry 46 of IV Schedule; and the Tribunal was right in not only relying on the certificates of the suppliers that the shoes were made of plastic but also on the Government Memo dt.17.10.2008 holding that moulded plastic footwear described in Entry 46 also includes not only the footwear of one moulded plastic piece but also more than one piece moulded and joined together. When the Department authorities did not make any product verification, they could not have changed the classification of the sports shoes from Entry 46 in Schedule IV, which they had been doing for the previous ten years, to the residuary Entry in V Schedule. Sports Apparel - HELD THAT:- The word garments in Entry 52 of IV Schedule is of wide import and sports apparel would fall under the said entry and the Tribunal did not commit any error in taking that view. Revision dismissed. 2020 (6) TMI 547 Rate of Tax - Instrument Cooling Fan - whether taxed under the heading Schedule-II(B)-3 taking it to be a part of larger equipment for communication, or under the residuary clause, taking it to be an electrical equipment - justification of the reassessment proceedings by the Revenue Authorities and the orders passed therein. HELD THAT:- The powers which have been given to the Commissioner for opening a reassessment even beyond a period of three years under sub-section 4 of Section 29 of the Act, where the Commissioner can initiate reassessment proceedings on his own or when he is satisfied with the reasons recorded by the Assessing Authority. In the present case the reassessment proceeding has been initiated on the basis of the reasons recorded by the Assessing Authority. The Assessing Authority had to assign reasons under sub-section (1) of Section 29 of the Act, which is grounded on the basic foundation of reasons to believe - the net result would be that even if the reassessment proceedings under the VAT Act can be initiated on the basis of a change of opinion of the Revenue Authorities, this must first satisfy the jurisprudence foundation contained in sub-section (1) of Section 29 of the Act, which is that the Authority must have reasons to believe , that such an reassessment should be done. This can only be done when he gives a clear cut finding and reasons as to why reassessment is being done. If he has reason to believe then he can change his opinion. But reasons must come first. There is no rebuttal of the petitioner s claim at any level that the product which he is selling is only a part of telecommunication system and although it is a cooling fan, it cannot be used in any other way but for cooling a telecommunication system. It is hence a part of telecommunication system, though independently it may still be classified for other purposes as an electric good - The provision which the petitioner relies upon is Sl. No. 3 of Schedule II (B) of the Uttarakhand Value Added Tax Act, 2005, which relates to a telecommunication system and then it gives a break up of the same and finally adds and parts thereof . Being a part of a telecommunication system an instrument cooling fan has to be taxed under this clause at 4.5%. It is a settled principle of law that if an item or entry clearly comes under one of the Schedules given in the fiscal law, where the rate of tax is to be determined, then it should not be relegated to the residuary clause. In this case the goods in question is categorically a part of telecommunication equipment and therefore it could have been charged only under entry no. 3 of Schedule II and not under the residuary clause. Petition allowed. 2020 (6) TMI 546 VAT on sale of Duty Entitlement Pass Book (DEPB) - Transaction took place in Tamil Nadu or Maharashtra - Ascertained goods or not - It is the petitioners' case that the asset in question constitutes specific and ascertained goods. Mr.Haribabu however, points out that the DEPB is categorised in Entry 70/Part B/ First Schedule to the Act as intangible goods along with copyright, patent and REP licence and is thus, according to him, unascertained - HELD THAT:- Explanation (V)(a)(i) provides that the sale or purchase of specified/ascertained goods shall be deemed to have taken place in the State if the goods are within the State at the time when the contract of sale or purchase is entered into. There being no dispute on the position that the goods in question, the DEPB, and additionally, the seller as well as the buyer were all located in Bombay at the time when the transaction in question was finalised, the turnover from the transaction is liable to tax only in Maharashtra. The sole argument of the Revenue is that the petitioner is an exporter, exporting and importing from the Tuticorin Port. Clause 4.3.4 of the Foreign Trade Policy containing the DEPB Scheme makes it clear that the passbook is issued only in regard to a specified Port, which in this case is Tuticorin. This then is the only nexus which the State of Tamil Nadu has to the transaction in question and in my considered view, is insufficient to bring the transaction to tax in Tamil Nadu. In the present case, we are concerned with a tangible asset, insofar as the right in connection with the export has been reduced to a passbook, constituting specified goods - The categories of specific/ascertained goods and unascertained/future goods are separate and distinct from tangible and intangible goods. The assets may be tangible or intangible on the one hand, also simultaneously being specific/unascertained on the other. Petition allowed. Indian Laws 2020 (6) TMI 545 Dishonor of Cheque - dispute is with regard to the actual amount borrowed and the period during which it was borrowed - legally enforceable debt or not - HELD THAT:- The trial court and also the appellate court has appreciated the facts and circumstances in a correct perspective and there is no illegality or irregularity in the finding of guilt under Sec.138 of the N.I.Act. Sentence - HELD THAT:- The sentence passed by the V Additional Sessions Judge, Ernakulam is to undergo simple imprisonment for three months and to pay compensation for ₹ 1,00,000/- in default to undergo simple imprisonment for two months - the sentence passed is modified to fine of ₹ 1,00,000/- in default to undergo simple imprisonment for three months. Fine amount, if realized, shall be paid to PW1 complainant as compensation under Sec.357(1)(b) Cr.P.C. Revision allowed in part.
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